4 Things That Will Scare Investors Away

Posted by RickCoplin under Raising Capital
From http://www.rickcoplin.com 3682 days ago
Made Hot by: PMVirtual on April 1, 2014 11:35 am

Raising money for your startup is a difficult, time consuming process. Successful entrepreneurs know that gaining investors is just as dependent on what you don't do, as what you do. Here are four simple things to avoid while raising funds.

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Written by lyceum
3676 days ago

Rick: Thanks for your tweet message and your input here! I will check out GoUnfunded.

It is all about "know, like and trust," right? And then keeping the referral engine (hat tip John Jantsch) running...

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Written by lyceum
3677 days ago

Rick: Thanks for your input! How would you talk with potential customers in the best way and then ask for investments?

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Written by RickCoplin
3677 days ago

Martin,

Talking with customers is the single most important thing you a do prior to building a solution. Here's some tips:

Talk to those in the industry you seek to serve and determine 1) if there is the need you perceive; 2) if your solution matches their needs; and 3) how your solution can be improved to meet those needs even better.

Be systematic about this. You want to collect and organize anecdotal information about your customer needs and preferences, then use that knowledge in product development and fund raising. A friend of mine who founded and runs a CRM company wrote a book "GoUnfunded". It goes into this in great detail (www.gounfunded.com/unfunded-book).

To really be successful, you must identify with and like your customers and be liked in return. Be interested in their business, their problems, and their successes. Forming relationships beyond the transactional enables us to learn deep details about customer needs that other, less engaged entrepreneurs, will miss.

Having knowledge and real relationships with potential customers will definitely help you raise funds, particularly when you can quote them and ask them to support you through offering testimonials verbally with interested investors.

I hope this helps,

Rick

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Written by lyceum
3678 days ago

Rick Coplin: Do you have examples of start-ups that have scared investors away? Do you also have success stories of investors investing in positive business deals?

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Written by RickCoplin
3678 days ago

Martin,

Absolutely, I have solid examples of both. The most often repeated mistake is not knowing your customers well or doing any research prior to building a prototype. I run across entrepreneurs frequently who make assumptions customers will flock to their idea without having talked to any potential customers. For example, I recently worked with an entrepreneur that had an interesting idea to create an app with tons of local information assuming that local businesses would buy add space as a source of revenue in return for app users being directed to their stores. She was trying to raise funds to support her ongoing development costs and not having any success. Once she began talking to potential customers however, she discovered that they had no interest in buying ads for his type of service, something investors had already pressed her on by the tie she came to us. She could have saved about 4 months of design and build time plus some of her savings, had she first talked to potential customers. We see this same pattern repeated frequently with both inexperienced and experience entrepreneurs.

In terms of positive outcomes for investment pitches, yes. I see this frequently as well and our company participates in some of the investment opportunities.

Thanks for asking,

Rick

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